January 31, 2006, 12:00 AM

Enterprising Strategy

Oracle, known for its enterprisewide software, is making a play for the retail market. Retek, ProfitLogic and G-Log are all part of Oracle now.

As Anchor Blue Retail Group Inc. grew to 255 stores under two brands, CEO Michael Bush realized it was time to deploy a new integrated enterprise software suite. His goal was one system that delivered on the promises of the Internet age with data integration across customer-facing applications like merchandising management and back-end systems like financial and supply chain management.

“We wanted to achieve more flexibility and capability in our core merchandising system to get more granularity-down to the particular combinations of color and stripes on a shirt, for instance-so we can see what’s selling and in what store,” Bush says.

In selecting a retail-oriented software suite Bush made a choice that would not have been available only a year ago: Oracle Corp. In doing so, he followed a route taken by big-company technology pioneers Best Buy Co. Inc. and the U.K.’s Tesco plc.

But the Oracle that they’re dealing with is not the same Oracle that has provided enterprise software and a market-leading expertise in database technology for nearly 30 years, becoming the second-largest software provider after Microsoft Corp. Oracle’s strength has always been as a horizontal provider of enterprise software that can be applied across multiple industries, catering to companies who want the benefit of an integrated suite of back-end operations software designed to handle everything from accounting to inventory management.

Now there is Oracle Retail, a new unit that has broken the mold at Oracle by serving a single industry. While Oracle addresses industries like financial services and health care as horizontal markets within its main Oracle software offerings, it has been building Oracle Retail as the first distinct unit that addresses a vertical market with a combination of enterprise software and best-of-breed point solutions, starting with its acquisition last year of retail operations software provider Retek Inc., now a core unit of Oracle Retail division. Oracle also acquired ProfitLogic’s markdown optimization application and store operations software from 360Commerce. Oracle Retail is headed by Duncan Angove, former chief strategy officer of Retek, who reports to Oracle president Charles Phillips, who reports to chairman and founder Larry Ellison.

For Anchor Blue Retail Group, a company that has been re-inventing itself over the past two years, the new software is a crucial ingredient in its plan to double its number of stores to about 500 over the next few years. The retailer operates two chains-the 170-store Anchor Blue, and another 85 Levi’s and Dockers by Most outlet stores-with total sales of about $400 million.

Thanks to improved merchandising and other retailing fundamentals, comp store sales were up last year, helping total sales to remain the same despite the closing of several non-performing stores, and leading to a sharp rise in profitability, Bush says.

Crowded market

But that’s not good enough, Bush adds. He figures the company is still short of its potential for sales and profits, which is why he’s turned to a new software backbone that he expects will provide the kind of information that will enable Anchor Blue Retail Group to operate like a cutting-edge retailer, viewing and responding to customer and operational data throughout the enterprise, and giving customers what they want, when and where they want it. “We’re really putting a lot of effort into making the store experience terrific, because it wasn’t so terrific before,” Bush says.

Anchor Blue has joined several other retailers, including Canada’s Reitmans women’s wear chain and the U.K. general merchandiser Tesco, who have recently turned to Oracle Retail to deploy or expand web-enabled enterprise software suites.

In the past several months, Oracle Retail has absorbed several leading retail industry software companies: Retek, for merchandising, supply chain, point of sale and other applications; ProfitLogic, for its expertise in software that tells merchants when to mark down prices to get maximum returns; Global Logistics Technologies, or G-Log, for supply chain management that goes beyond Retek’s offerings; and 360Commerce, for multi-channel software that can bring the benefits of enterprise integration down to single stores. In addition, Oracle last year acquired PeopleSoft, a provider of enterprise software for human resources management and other applications used by retailers as well as other types of companies.

Why the bold move into retail? It isn’t only Oracle that’s undergoing a major market change. The retail industry itself is at a point where merchants of all sizes and categories are ready-in many cases overdue-for new web-enabled enterprise software that can handle the demands of an industry that has evolved at a torrid pace in the past decade. The evolution is multi-pronged:

l Web-enabled technology itself has improved to a new point of retail operating standards, which provide retailers with an ability to see and react to customer activity and operating data in real time throughout a multi-channel enterprise.

l Consumers, having experienced the benefits of multi-channel shopping provided by leading-edge retailers, have begun to expect the kind of service that results from this new level of integrated technology.

l Consistent growth in retailers’ revenues and profits has provided merchants with the capital to invest in new infrastructure.

Open architecture

Hovering over all these trends is the increasing role that open-systems technology, or web-based service-oriented architecture, is playing as a ubiquitous part of retail technology systems. “A few years ago you wouldn’t have this trend because we didn’t understand the value of open systems,” says Jeff Roster, analyst at Gartner Inc. who specializes in retail industry technology.

The web technology revolution that got most of its early attention in online retailing has finally come around to affect retailers throughout their multi-channel enterprises, he says. “The Internet created Amazon, which posed a threat to Barnes & Noble and started a massive process of understanding technology,” Roster says.

Meanwhile, he adds, “The consumer base grew up and insisted on retailers giving them the multi-channel functionality to interact with their systems. So retailers are getting behind technology as an opportunity to drive incremental revenue as well as save cost throughout the enterprise, and that’s what all these vendors see. They want to position themselves to be a dominant software provider and be a one-stop shop.”

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